By Richard Ebeling
The mainstream media and the Washington, D.C.-obsessed news pundits are in hysterics that the United States government is potentially facing default if the Congress does not increase the legal debt limit, so the U.S. Treasury can continue to borrow more and more hundreds of billions of dollars in the fiscal year 2014 to cover the government’s spending in excess of what it collects in tax revenues.
What has been given little attention in all of this anxiety is that if the debt limit is not raised the Federal government will have to operate within the confines of a balanced budget. That is, the government would be authorized to only spend what it collects in taxes.
This, in itself, makes the case for not increasing the debt limit very appealing. Of course, this would mean that the government could not cover a lot of those expenditures that it has contracted or legislatively committed itself to in previous years. This is what has generated most of the outcry.
But we should also realize that if the government is prevented from anymore borrowing, it would become crystal clear that the government does not possess an unlimited financial horn-of-plenty from which to satisfy every conceivable ideological and special interest demand for which an appeal is made to Washington.
If any of these demands for government spending above what can be covered by current government revenues were to be satisfied, it would then compel politicians and bureaucrats to tell the American public that which they avoid admitting like the plague: there is an inescapable trade-off between the people spending their own money and the government taxing it away and spending for them.
In other words, no longer could there be the illusion of a “free lunch,” in which the Federal government makes it seem that something could be had for nothing, or at less than its real full cost. Every additional dollar of higher government spending above what is currently collected in taxes would require one less dollar left in the hands of private citizens who had produced and earned it, because that extra dollar of government spending would require an extra dollar of taxes taken out of the taxpayer’s pocket.
This would require the citizens and the taxpayers of the United States to ask themselves exactly what it is they want the government to spend money on, and for which they will have to make the hard choice to have less money in their own pockets to pay for it.
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